Did you know the EU Pay Transparency Directive includes changes to employee rights to information on salary?
There are two key rulings that are relevant:
- Article 6 – transparency of pay across job levels and career progression policies
- Article 7 – employee right to pay information
Let’s take a closer look at both of these.
“The EU Pay Transparency Directive is the most significant change to employment law across the EU in decades”.
Article 6: Pay and career progression transparency
Article 6 of the EU Pay Transparency Directive rules that employers must make two things ‘easily accessible’ to employees:
- Criteria used to determine how pay changes across the company’s job levels
- The criteria for determining career progression across the levels.
That might include, for example, skills and competencies, autonomy, business impact etc that is expected for each job level within the company’s overall hierarchy.
The Directive also states that the criteria must be gender neutral i.e. there must be no difference in pay and career progression across levels between men and women.
💡 Here’s the full Article 6 wording:
Article 6: Transparency of pay setting and career progression policy
The employer shall make easily accessible to its workers a description of the criteria used to determine pay levels and career progression for workers. These criteria shall be gender-neutral.
Article 7: Employee right to information
Article 7 of the EU Pay Transparency Directive effectively bans pay secrecy by employers.
It rules that employees have the right to:
- Request information about their own pay level
- Request information about the average pay levels for other employees doing equal work or work of equal value to them, broken down by sex
- Disclose information about pay with their colleagues – if it’s for the purpose of determining if there is pay discrimination occurring.
And the employer must:
- Inform all employees once per year about their right to receive the information above
- Provide requested information within ‘a reasonable period of time’
💡 Here’s the full Article 7 wording:
Article 7: Right to information
- Workers shall have the right to receive information on their individual pay level and the average pay levels, broken down by sex, for categories of workers doing the same work as them or work of equal value to theirs.
- Employers shall inform all workers, on an annual basis, of their right to receive the information referred to in paragraph 1.
- Employers shall provide the information referred to in paragraph 1 within a reasonable period of time upon a worker’s request. The information shall be provided in accessible formats for workers with disabilities upon their request.
- Workers shall have the possibility to request the information referred to in paragraph 1 through their representatives or an equality body.
- Workers shall not be prevented from disclosing their pay for the purpose of enforcing the principle of equal pay between men and women for equal work or work of equal value.
- Employers may require that any worker having obtained information pursuant to this Article shall not use that information for any other purpose than to defend their right to equal pay for the same work or work of equal value and not disseminate the information otherwise.
How does this work with GDPR and data privacy?
This is one of the murkier areas of the EU Pay Transparency Directive.
The disclosure of salary information under Article 7 is specifically ‘pay levels’ rather than specific salaries. But, there could conceivably be instances when this leads to personal data being identified or closely inferred – if there is a pay level which includes very few employees.
Article 12 of the Directive covers data protection with three key takeaways:
- Any processing of personal data required for Article 7 (as well as for gender pay gap reporting requirements) must be provided in line with GDPR.
- Personal data processed in compliance with the EU Pay Transparency Directive must not be used for any application other than equal pay.
- Member states may decide that if the disclosure of pay information to comply with an employee request under Article 7 would result in an individuals salary being identifiable, then the employer must not disclose directly to the employee but rather to a workers’ representative or equality body, who will inform the employee without disclosing actual salaries.
So, this is covered by the Directive, but it’s one of the areas that is up to individual EU member states to interrogate and bring into law.
Therefore, exactly how the relationship between data protection and pay disclosure will work remains to be seen as the legislation is rolled out across countries – but it’s a clear tension in the legislation which is already being highlighted in analyses of the Directive.
Why are these rulings included in the EU Pay Transparency Directive?
So, that’s the Article 6 and 7 rulings.
Why have they been included?
Well, the core principle behind the EU Pay Transparency Directive is that equal work (or work of equal value) should receive equal pay.
As is stands, that isn’t always the case, especially because of pay discrimination based on gender – especially the gender pay gap.
If this pay discrimination isn’t visible, it will never be properly addressed, which is why the Directive is introducing consistent legislation to improve pay transparency.
“Pay transparency allows workers to detect and prove possible discrimination based on sex. It also shines light on gender bias in pay systems and job grading that do not value the work of women and men equally ... Since such bias is often unconscious, pay transparency can help raise awareness of the issue among employers and help them identify discriminatory gender-based pay differences.”
Employees can’t assess if they are being paid unfairly and enforce their right to equal pay if they only have access to their own salary information, without the context of a) how their salary fits into the wider salary and progression structure across the company and b) how their colleagues that perform equal work are being paid.
Historically, salary has been a pretty taboo subject to talk about with colleagues. Some companies have even included a pay secrecy clause in employment contracts to prevent this from happening.
So these rulings are there to change that.
And they’re beneficial for employers too.
We know that, despite the taboo, many employees do already commonly discuss salary with their peers.
When that’s done behind the scenes and it arises that there are pay disparities occurring, it can spark discontent amongst employees – which is difficult for HR and people teams to address.
What action(s) does my company need to take to prepare?
If your company is based in the EU or hires in the EU what do you need to do to prepare for these changes on employees’ right to information about salaries and career progression?
Here are 4 actions to consider:
- Audit your level framework, career progression framework, and salary bands with employees in the context of whether you would feel comfortable with employees accessing them
- Identify and address any issues that are spotted during the audit – any internal pay equity issues across levels and genders
- Ensure the criteria used to determine career and pay progression across job levels are a) gender neutral, b) documented, and c) there’s an ‘easily accessible’ place the criteria can live e.g. in an employee handbook or intranet
- Decide the process and timing for informing employees annually about their right to receive salary and career progression information from you.
This can feel uncomfortable for employers – it’s a level of transparency we aren’t yet used to, and it can feel like it will cause questions and unrest.
But, keep in mind that the legislation is ultimately for progress towards greater compensation fairness and better compensation conversations – which can only lead to happier and more motivated employees.